[2023] KETAT 284 (KLR)

Parshva Mombasa Ltd v Commissioner of Customs and Border Control (Tax Appeal 195 of 2022) [2023] KETAT 284 (KLR) (19 May 2023) (Judgment)

Neutral citation: [2023] KETAT 284 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 195 of 2022

RM Mutuma, Chair, RO Oluoch, EN Njeru, D.K Ngala & EK Cheluget, Members

May 19, 2023

Between

Parshva Mombasa Ltd

Appellant

and

Commissioner of Customs and Border Control

Respondent

Judgment

Background 1. The Appellant is a limited liability company incorporated under the Companies Act of the Laws of Kenya, and is in the business of importation and sale of stationery.

2. The Respondent is a principal officer appointed under Section 11 of the Kenya Revenue Authority Act, mandated with the responsibility of assessment, receipting and accounting for all the tax revenue, as an agent of the Government of Kenya, as well as the administration an enforcement of the various tax laws set out in the schedule to the said Act.

3. The dispute subject of this appeal arose from a desk review of imports under tariff 4802. 56. 00 for the period 2nd August 2018 to 8th February 2022. The Respondent stated that the review revealed a short levy of taxes as a result of the application of a duty rate of 10 % instead of 25%. Consequently, the Respondent demanded for the short-levied taxes from the Appellant amounting to the sum of Kshs 6,213,416 vide its demand letter dated 7th February 2022.

4. The Appellant upon receipt of the demand for additional taxes applied for a Commissioner’s review vide its letter dated 16th February 2022 pursuant to Section 229 of the East African Community Customs Management Act, 2004( EACCMA), objecting to the Commissioner’s decision to issue the demand notice for Kshs 6,213,416. 00

5. The grounds upon which the Appellant objected were ;i.That in its opinion it was implausible, illogical, and extremely unreasonable for the Respondent to argue that since the East African Gazette Notice No. EAC/112/2018 dated 2nd August 2018 corrected Legal No. EAC/69/2018 dated 30th June 2018, this effectively reverted the duty rate of imported items under tariff 4802:56:00 from 10% to 25%,ii.That the tax decision violated the Appellant’s right to legitimate expectation, right to property, right to fair administrative action and right to access justice.

6. The Appellant subsequently filed the appeal on 25th February 2022 with the Tribunal before the Respondent could issue its review decision.

The Appeal 7. The Appellant filed its Memorandum of Appeal on 25th February 2022, and set out the following grounds of appeal:i.That there is no law which imposed a duty of 25% on paper and paperboard products in the period between 2nd August 2018 and 27th January 2022. ii.That even if it were to be argued that some law exists which imposed a duty rate of 25 % on paper and paperboard products imported under HS code 4808:56:00. The Appellant by reason of the grounds aforesaid prayed that the Tribunal allows the appeal, annuls the review decision and the demand notice, with costs to the Appellant.

The Appellant’s Case 8. The Appellant to support its grounds of appeal relied on its Statement of Facts filed on 25th February 2022, the bundle of documents filed on 6th December 2022, and the Written Submissions filed 6th December 2022.

9. The Appellant submitted that liability to customs duty for goods imported into Kenya is governed by the provisions of the EACCMA, Section 110 of EACCMA provides that the rates of duty payable shall be specified in the protocol on the establishment of the East African Community Customs Union.

10. Further, that Article 12 (1) of the Protocol provides that the minimum rate shall be 10 % and that the maximum rate shall be 25%, while Article 12(3) of the protocol provides that EAC Council of Ministers shall review the common external tariff structure from time to time. The reviewed tariff rates are published in the East African Community Gazette.

11. The Appellant stated that by a Gazette Notice No. EAC/21/2014 dated 20th June 2014, the Council reduced the tariff rate for paper and paper board products imported under HS code 4802:56:00 from the maximum set rate of 25% to 10%,

12. The Appellant stated that the EAC CET tariff went through further reviews to correct errors, which culminated in the Respondent configuring the Tradex system (Simba System) to collect duty under HS code 4802:56:00 by simply entering the HS code into the system whereupon the both the duty rate as well as the total tax payable would be given by the Simba system itself in the form of Form C17B Customs Entry.

13. The Appellant contended that it would be dishonest, callous, malicious and in bad faith for the Respondent to allege that the rate of 10% was not the correct rate for HS code 4802:56:00.

14. The Appellant stated that the Respondent through a Memo dated 27th January 2022, instructed customs officers to immediately conduct a post clearance audit on all goods that were cleared under HS code 4802:56:00 between 2nd August 2018 and 27th January 2022 purportedly because the Respondent had “realized”, first, that Legal Notice No. EAC/112/2018 had deleted Paragraph 2 of the Legal Notice No. EAC/69/2018; Secondly, that the effect of the deletion was to import the duty rate 25% for HS Code 4802:56:00; and lastly, that clearing agents/importers had been applying the rate of 10% for HS Code 4802:56:00 instead of 25%. The Appellant stated further that this Memo amounted to an admission by the Respondent that up to that date, the customs system had been configured for tariff No. 4802:56:00 to pick import duty at 10%.

15. The Appellant contended that the reliefs sought in the Memorandum of Appeal should be granted as it is the Respondent (and not the Appellants nor their clearing agents) who actually applied the duty rate of 10% on all paper and paperboard products imported into the Country under HS code 4802:56:00 between 2nd August 2018 and 27th January 2022 by feeding into its Tradex system the duty rate of 10% as the mandatory duty rate that all importers under this HS code had to pay before they could get their goods cleared, as the system was configured by the Respondent to automatically pick the duty of 10% once the HS code 4802: 56:00 is keyed in.

16. The Appellant submitted that the main question that emerges from its grounds and averments herein, is whether there is any law that fixed the duty rate for paper and paperboard products classified under tariff code 4802:56:00 at 25%.

17. The Appellant contended that although the two parties agreed that the duty rate for paper products was set at 10% by the EAC Council of Ministers vide Legal Notice No. EAC/21/2014 on 20th June 2014, there is a sharp polarity of opinion as between the parties as to whether that rate has ever been increased to 25%.

18. The Appellant further contended that while the Respondent maintains that it has, and has premised its demand notices upon the supposition, the Appellant maintains that no law has ever been enacted and promulgated by the council, increasing the duty rate for paper and paper products under HS code 4802:56:00 from 10% to 25% since 20th June 2014, when the duty for paper products was last set by the Council.

19. The Appellant submitted that, every law must be formally enacted, secondly, every law that has been formally enacted must be formally promulgated through publication in an official gazette which must also indicate the date of commencement, and lastly, both the enactment and promulgation can only be done by the body that has the requisite legal mandate to enact the law.

20. The Appellant submitted that under Section 110 of EACCMA, duty rates shall be as prescribed by the Protocol and it sets forth as follows;“liability on duty; 110. (1)shall be paid on goods at the rate and in the circumstances specified in the protocol.”

21. That under Article 12(3) of the protocol for the establishment of the EAC Customs Union, the Council of members of the EAC may review tariff rates for customs duties chargeable by member states. That the Article provides as follows;“The Council may review the common external tariff structure and approve measures to remedy any adverse effects which any of the partner states may experience by reason of the implementation of this part of the protocol or, in exceptional circumstances, to safeguard community interests,(5)The Council shall cause all regulations and directives made or given by it under this treaty to be published in the Gazette; and such regulations or directives shall come into force on the date of the publication unless otherwise provided therein.”The same was gazette and published on 20th June 2014.

22. The Appellant therefore submitted that in view of the foregoing, the Respondent’s assumption that the effect of the deletion of the Legal Notice no. EAC/69/02018 was to increase duty for HS Code 4802:56:00 is therefore erroneous, and therefore the Respondent acted illegally, unconstitutionally, irrationally and ultra vires its powers and in bad faith, when it purported to enforce and or implement suggestions, proposals, or other indications and communications posted on the EAC website which have no force of law.

23. It was the Appellant’s submission that the Respondent has averred that following the Appellant’s erroneous issuance of the Notice of Withdrawal dated 14th April 2022, the instant Appeal is incompetent. That however, the Respondent failed to disclose that the Appellant vide a letter dated 6th May 2022 highlighted the error with the issuance of the Notice of Withdrawal in the instant matter and other matters and duly explained that the same were filed in error. That the said letter was duly received by this Honourable Tribunal, and Respondent’s Legal Services and Board Coordination Department on the same date. That the Respondent despite receiving the letter on 6th May 2022 has never to date filed any application challenging the competence of the instant Appeal. That the Respondent also did not respond to the said letter in objection or raise a preliminary point of objection for consideration during the various mentions of the instant Appeal.

24. The Appellant submitted that the Respondent’s conduct in the instant Appeal stops it from turning back at this juncture and contend that the Appeal was withdrawn.

25. The Appellant also submitted that the Respondent’s assertion that the Tribunal lacks jurisdiction is baseless and unfounded. The Appellant continued that whereas it was correct that it tendered its notice of objection on 16th February 2022, it further notes that to date the Respondent has never issued a review decision as per the Tax Procedures Act or the EACCMA.

26. The Appellant submitted that the doctrine of exhaustion is not an absolute doctrine and there are exceptions to it. That in the case of Chief Justice & President of Supreme Court & Anor v Bryan Mandila Khaemba [2021] eKLR, the Supreme Court addressed itself to these exceptions and stated at para 25 that;-“…the doctrine of exhaustion notwithstanding, courts still retain residual jurisdiction to intervene in exceptional circumstances despite existence of alternative remedies where the action complained of is marred by illegality and procedural irregularities.”

27. The Appellant has consequently submitted that as highlighted in the main issue, and in the subsidiary issues herein, the Respondent cannot administer non-existent tax laws and any attempt to do so is an illegality and constitutes an abuse of due process by the Respondent. It therefore asserted the Tribunal has the jurisdiction to hear and determine the Appeal herein.

28. The Appellant further submitted that in any event, the Respondent has not rendered any response to its notice of objection to date, and in the event the Tribunal finds that it does not have jurisdiction, the objection application, ought to be allowed by operation of the law, and the impugned demand notice set aside.

29. The Appellant in its submissions argued that the Respondent cannot keep changing its position on a matter i.e. adopt an interpretation one day on it, and then upon discovering it could have collected more using a rival interpretation change and adopt the other interpretation, and then punish taxpayers for every changed position, and whether the Respondent can punish taxpayers for obeying its instructions on the Tradex system.

30. The Appellant also submitted that the Respondent is guilty of inordinate delay. The Appellant stated that as was held in the Court of Appeal in the Universal Case as well as in the Supreme court, in the Export Trading Co case, the fact that the Respondent is allowed to conduct a post clearance audit within five years, does not mean that it should just sit back and wait and only strike after four years when it is no longer possible for the taxpayer to recover the taxes demanded from its customers because all the subject goods have long been sold out.

31. Wherefore by reason of the foregoing submissions, the Appellant prays that the Appeal herein be allowed and the impugned demand notice set aside.

The Respondent ‘s Case 32. The Respondent has set out its response to the Appellant’s case on the Statement of Facts filed on 25th March 2022 and written submission filed on 23rd November 2022, and the Respondent has refuted each and every allegation by the Appellant in its Memorandum of Appeal and Statement of Facts.

33. The Respondent stated that the EAC Notice No. EAC/112/2018 dated 2nd August 2018 deleted item no.2 in the Legal Notice EAC/69/2018 dated 30th June 2018, which effectively reverted the duty rate of items imported under tariff 4802:56:00from 10% to 25%. It further stated that this change was not effected in the Customs systems, leading to goods being released at a lower duty rate.

35. The Respondent stated that tariff code 4802:56:00 covers ; “ Uncoated paper and paperboard, of a kind used for writing, printing, or other graphic purposes, and non-perforated punch cards and punch tape paper, in rolls or rectangular (including square), of any size, other than paper of heading 48:01 or 48:03; hand-made paper and paperboard, weighing 40 g/m 2 or more but not more than 150 g/m2, in sheets with one side not exceeding 435 mm and the other side not exceeding 297 mm in the unfolded state.

36. The Appellant also stated that its post clearance audit (PCA) team conducted a desk review of customs entries of the importers of items under the tariff code for the period 2nd August 2018 to 8th February 2022 pursuant to Sections 235 and 236 of the EACCMA, 2004. The Respondent then issued a demand notice dated 7th February 2022, pursuant to Section 135 of the EACCMA, requiring the Appellant to pay the short-levied taxes of Kshs 6,213,416. 00

37. The Respondent stated that the Appellant sought for a review of the taxes demanded, under Section 229 of EACCMA, but the Appellant filed the Appeal at this Tribunal before the Respondent could render its review decision on the short-levied taxes.

38. The Respondent has posited that Sections 235 and 236 of EACCMA gives the Respondent powers to call for documents and conduct a post clearance audit (PCA) on the import and export operations of a taxpayer within a period of five years from the date of importation or exportation. That where the PCA reveals that taxes were short levied, or erroneously refunded, Sections 135 and 249 (1) of EACCMA empowers the Respondent to recover any such amount short levied with interest at a rate of two percent per month for the period the taxes remain unpaid.

39. The Respondent also averred that Section 229 of EACCMA provides for review by any person affected by the decision or omission of the Respondent on matters relating to customs and provides the legal timelines to be observed. That Section 230(1) of the Act provides that a person dissatisfied with the Commissioner’s decision, after an application for review under Section 229 of EACCMA may appeal to the Tax Appeals Tribunal in accordance with Section 231 of the Act.

40. The Respondent also submitted that this Tribunal lacks jurisdiction to make any determination on this Appeal on its merits as the Appellant vide its Notice of Withdrawal dated 14th April 2022, withdrew this appeal on- 20th April 2022, and the Tribunal is therefore functus officio,

41. The Respondent stated that the Appellant premised its withdrawal on Section 27(1) of the TAT Act, which states as follow:-“An appellant may, by notice in writing, withdraw the appeal.”

41. The Respondent submitted that it is only where the Tribunal dismisses an appeal under subSections 2 or 3 of the Act or upholds an appeal under subSection 4 thereof, that an appeal may be reinstated. Such reinstatement can only be done by the Tribunal on the application of the Appellant or Respondent who must make such an application within thirty days from the date of receipt of the notice of the decision.

42. The Respondent stated that there is no provision under Section 27 of the Act, for the cancellation of the notice to withdraw an appeal. It contended that once the Appellant by notice in writing withdrew its Appeal pursuant to Section 27(1), and the Respondent received notice of such withdrawal, the Appeal stood terminated, and this Tribunal became functus officio, The Respondent therefore contended that thereafter there cannot be a setting aside of the notice to withdraw or cancellation of the said notice, the appeal having been terminated it cannot be resuscitated by a cancellation of the notice of withdrawal. The Respondent relied on the case of Muhugu Ltd -vs- Commissioner of Domestic Taxes [2020] Eklr and submitted that the Notice of withdrawal or discontinuation had the effect of terminating this Appeal. The appeal having been terminated it cannot be in any way be reinstated or resuscitated.

43. The Respondent also submitted that the Appeal is also incompetent as this Tribunal lacks jurisdiction to hear this matter, in view of the doctrine of exhaustion of internal dispute resolution mechanism. It stated that the Appellant vide a notice of objection dated 16th February 2022, objected to the Respondent’s decision to issue the demand notice dated 7th February 2020, which demand required the Appellant to pay the Respondent Kshs 6,213,416 being short levy for the Appellant’s consignment of paper under HS code 4802:56:00 arising from the application of import duty at the rate of 10% instead of 25% as per the provisions of the East African Gazette Notice No. EAC/112/2018 dated 2nd August 2018.

44. The Respondent stated that though the Appellant, had not in its notice of objection dated 16th February 2022, expressly indicated the enabling provisions of law pursuant to which it had made its objection, one can only deduce from the said letter that the Appellant premised its objection on Section 51 of the TPA, 2015.

45. The Respondent further stated that the decision to demand the sum of Kshs 6,213,416. 00 being short levied taxes was made pursuant to Section 135 of EACCMA, hence was therefore not a tax decision within the meaning of Section 2 of the TPA. That the decision was in fact a decision the Commissioner made on a matter relating to customs. That Section 2 of EACCMA defines “customs’ to mean a Customs Department of the Partner states. The Respondent stated that the relevant provision of the law would therefore be Section 229 of EACCMA.

46. The Respondent further stated that a plain reading of Section 229( 4 & 5) of EACCMA clearly indicates that the Respondent has 30 days to determine an application for review, and provides that where the Commissioner fails to communicate his or her review decision within the 30 days to the person lodging the application, then the Commissioner will be deemed to have made a decision to allow the application, Then under Section 230 (1) of EACCMA, a person dissatisfied with the decision of the Commissioner under Section 229 of the Act, has the right to appeal to the Tax Appeals Tribunal established in accordance with Section 231 of the Act.

47. The Respondent stated that by the time the Appellant lodged its Appeal with the Tribunal, on 23rd February 2022, the 30 days period stipulated in Section 229 (4) of EACCMA had not lapsed. That under Section 2 of the TAT Act, an appeal, means an appeal to the TAT against a decision of the Commissioner under any of the tax laws, The term “tax laws “ has been defined under the same Section 2 of the TAT Act to include the EACCMA.

48. It was also stated by the Respondent that the Appellant lodged its Appeal pursuant to Section 12 of the TAT Act, which stipulates as follows;“A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law, may subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal’’

49. The Respondent submitted that in light of its aforesaid submissions, the Appellant’s Appeal is premature as it has not exhausted the internal mechanism as set out in Section 229 of EACCMA. The Appellant moved this Tribunal while the Commissioner was still seized of the matter of the Appellant’s application for review, the Respondent contended that amounts to an abuse of the court process.

50. It was a further submission of the Respondent that the doctrine of exhaustion requires that the Applicant ought to have exhausted the internal dispute resolution mechanism as set out in Section 229 of the EACCMA before moving to the Tribunal, The Respondent cited the case of Speaker of the National Assembly -vs- Karume 1992 eKLR, where it was stated;“where there is a clear procedure for redress of any particular grievance by the constitution or an act of parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures.”

51. The Respondent also cited the case of Geoffrey Muthinja Kabiru -vs- Samuel Munga Henry & 1756 Others, where it was held that;“It is imperative that where a dispute resolution mechanism exists outside courts, the same be exhausted before the jurisdiction of the courts is invoked...”

52. The Respondent therefore submitted that as this Appeal is incompetent, the Tribunal cannot therefore exercise its adjudicatory powers conferred by the law, or the Constitution,

53. The Respondent also relied on Bwana Mohamed Bwana v Silvano Buko Bonaya & 2 Others [2015] eKLR, and The owners of motor Vessel Lillian “s” v Caltex Oil Kenya Ltd [1989] KLR.

55. On the merits of the appeal, The Respondent submitted that there is no dispute as to what was imported, whether the same is captured in the CET 2017 version, or the tariff code applied, the point of departure is the rate of duty applicable for the tariff code for the imported goods.

56. The Respondent stated that by the East African Community (EAC) Gazette Vol. AT1- NO 8 of 20th June 2014, in Legal Notice No. EAC/21/2014, the Council of Ministers in exercise of the powers conferred upon the Council of Ministers by Articles 12(3) and 39 of the protocol on the establishment of the EAC Customs Union, approved the following measures on customs duty rates on the items provided under the Harmonized Commodity Description and Coding system in annex 1 to the protocol; in respect of HS code 4802:56:00, decreased the duty rate from 25% to 10%.

57. It further stated that, pursuant to EAC Gazette Vol.AT 1 – NO.16 of 7th October 2014, in Legal Notice EAC/57/2014, the Council of Ministers in exercise of the powers conferred upon the Council by Articles 12(3) and 39 of the protocol on the establishment of the EAC Customs Union approved the following measures on customs duty rates on the items provided under the Harmonized Commodity Description Coding system in Annex 1 to the protocol; in respect of HS code 4802:56;00 for paper weighing 40 g/m2 or more, but not more than 150g/m2, in sheets with one side not exceeding 435 mm and the other side not exceeding 297 mmm2 in unfolded state- increased the duty rate from 10% to 25 %.

58. Regarding the Appellant’s claim of legitimate expectation, the Respondent submitted that a legitimate expectation cannot be an expectation against the clear provisions of a statute. The requirements for a successful reliance on the doctrine were articulated in the Supreme Court in Communications Authority of Kenya v Royal Media Services and 5 others [2014] eKLR ;“… there cannot be a legitimate expectation against the clear provisions of the law or the constitution.”

59. In conclusion the Respondent submitted that the PCA and demand for short levied taxes were made pursuant to Section 235, 236, and 135 of EAACCMA within the statutory timelines provided therein and hence within the law, and therefore no legitimate expectation arising in favour of the Appellant.

60. By reason of the foregoing submissions the Respondent prayed that the Appellant’s appeal be dismissed for lack of merit.

Issues for Determination 61. The Tribunal having carefully considered the pleadings filed, the evidence tendered and the submissions made by the parties, is of the considered view that this Appeal crystalizes into two issues as follows;i.Whether the Appellant’s appeal before the Tribunal is incompetent for lack of jurisdiction; andii.Whether there was in existence any law fixing the duty rate for paper and paperboard products classified under tariff code HS 4802:56:00 at 25% during the period 2nd August 2018 and 27th January 2022.

Analysis and Determination i. Whether the Appellant’s appeal before the Tribunal is incompetent for lack of jurisdiction. 62. The Respondent has strongly objected to the Appellant’s Appeal being considered on its merits by this Tribunal ostensibly on the grounds that this Tribunal is not seized of the jurisdiction to hear and determine the Appeal on its merits.

63. The thrust of the Respondent’s objection is founded on two issues which it contended go to the root of the Tribunal’s jurisdiction, being;i.That the Appellant withdrew its appeal, thus the Tribunal was rendered functus officio hence there is no appeal pending before the Tribunal.ii.That the Appellant filed its appeal before the Tribunal before the Commissioner rendered his review objection, hence there was no appealable decision on which to ground the appeal, thus the Appeal as it stands is incompetent as it is in breach of the doctrine of exhaustion, and bad in law.

64. On the issue of withdrawal, the Respondent contended that the Appellant vide a Notice of Withdrawal dated 14th April 2022 and filed on 20th April 2022, withdrew the Appeal dated 23rd February 2022. That the Respondent was served with the Notice of Withdrawal on 20th April 2022. That on the 6th May 2022, the Appellant filed a Notice of Cancellation of the Notice of Withdrawal on the ground that the Notice of Withdrawal was filed in this Tribunal in error.

65. The Respondent has submitted that this Tribunal lacks jurisdiction to make any determination on the merits of this Appeal, as the Appellant vide its Notice of Withdrawal dated 14th April 2022, withdrew this Appeal on 20th April 2022, and the Tribunal therefore became functus officio.

66. The Appellant grounded its withdrawal on Section 27(1) of the Tax Appeals Tribunal Act, which provides as follows;“27. Discontinuance, dismissal, or reinstatement of an appeal1. An appellant may, by notice in writing or through electronic means, withdraw the appeal.”

67. The Respondent submitted that it is only where the Tribunal dismisses an appeal under Sub-section 2 and 3 of Section 27, or upholds an appeal under Subsection 4, that an appeal may be reinstated, and there is no provision under Section 27 to for the cancellation of the notice to withdraw the appeal. It relied on the case of Mahugu Ltd v Commissioner of Domestic Services [2020] eKLR where it was held that;“The Respondent submitted that the notice of withdrawal or discontinuous had the effect of terminating this appeal, and the appeal having been terminated it cannot in their view be reinstated or resuscitated, and the Tribunal became functus officio.”

68. The Appellant on the other hand, the Appellant has contended that what the Respondent has failed to disclose is that the Appellant vide its letter dated 6th May 2022, highlighted the error with issuance of the Notice of Withdrawal in the instant matter and other matters, and duly explained that the Notice of Withdrawal was filed in error. The said letter was duly received by the Tribunal and the Respondent’s Legal Services and Board Coordination Department on the same date.

69. The Appellant averred that the Respondent despite receiving the letter on 6th May 2022 has never to date filed any application challenging the competence of this Appeal, The Respondent also never responded to the said letter in objection or raised a preliminary point of consideration during the various mentions of the current appeal.

70. The Appellant also contended that though the Respondent has relied on Section 27(1) of the TAT Act to buttress the position that this Appeal was withdrawn, and further relied on the case of Muhugu Ltd - vs- Commissioner of Domestic Taxes [2020] eKLR, it is trite to note the circumstances in Muhugu case are fundamentally different from the instant Appeal, in that, in the Muhugu case, the Appellant filed an appeal in the local committee on 28th April 2014, they then filed a Notice of Withdrawal on 15th March 2016, about two years later and the Tribunal then issued an order to the effect that the appeal had been withdrawn. The Appellant then approached the Tribunal again through an application dated 12th February 2020 for the reinstatement of the appeal.

71. The Tribunal having noted the circumstances of the case cited by the Respondent, agrees with the Appellant that there are glaring differences to warrant a comparative reliance on the case; whereas the application filed by Muhugu sought to reinstate an appeal filed in 2014 and withdrawn in 2016 pursuant to an order of the Tribunal, in the instant the Appellant issued a Notice of Withdrawal in error, and promptly proceeded to correct the error before the Tribunal could issue an order to effect the withdrawal of the appeal.

72. Having noted the circumstances of the Notice of Withdrawal issued by the Appellant, pertinent is that the Tribunal did not issue an order confirming withdrawal of the appeal, which would then have necessitated an application for reinstatement as argued by the Respondent who has continued to participate in the conduct of the Appeal without raising any formal objection, that the Tribunal is functus officio.

73. Consequently, the Tribunal finds and holds that as the alleged Notice of Withdrawal issued by the Appellant was corrected before the Tribunal had issued an order effecting the withdrawal of the appeal, then the withdrawal notice did not crystalize and did not effectively become valid, and was thus of no consequence to the continuity of the Appellant’s Appeal, and the converse is that the Tribunal was not rendered functus officio.

74. On the second issue of the Appellant filing the Appeal herein before the Respondent had issued a review decision, the Respondent has submitted that the Appeal herein is incompetent as the Tribunal lacks jurisdiction to hear and determine the Appeal in view of the doctrine of exhaustion of internal dispute resolution mechanism.

75. The Appellant vide a notice of objection dated 16th February 2022 objected to the Respondent’s decision to issue the demand notice dated 7th February 2022, which demand required the Appellant to pay to the Respondent a sum of Kshs 6,213,416. 00 being short levy of customs duty for the Appellant’s consignment of imported paper under tariff HS code 4802:56:00 arising from the application of import duty at the rate of 10 % instead of 25%.

76. The Appellant subsequently lodged this Appeal on 22nd February 2022 pursuant to Sections 12 and 13(1) of the Tax Appeals Tribunal Act. It is worth noting that the Appeal was filed barely a week after lodging of the notice of objection, which is hardly enough period for the Commissioner to consider the Objection and render a review decision as provided by the law.

77. A plain reading of Section 229(4) and (5) of the EACCMA clearly indicates that the Respondent has 30 days to consider and determine an application for review and provides that where the Commissioner fails to communicate his or her review decision within the time provided in subsection (4) to the person lodging the application for review, then the Commissioner shall be deemed to have decided to allow the objection application. Under Section 230 of EACCMA, a person dissatisfied with the decision of the Commissioner under Section 229 of the Act, has a right to appeal to a Tax Tribunal established in accordance with Section 231 of EACCMA.

78. By the time the Appellant lodged the Appeal herein on 25th February 2022, the 30 days period stipulated in Section 229(4) of the EACCMA had not lapsed.

79. Section 231 of EACCMA provides that;-“Subject to any law in force in the partner states with respect to tax appeals, each partner state shall establish a tax appeals tribunal for the purpose of hearing appeals against the decisions of the Commissioner made under Section 229”.

80. Under Section 2 of the Tax Appeals Tribunal Act, an “appeal “ means an appeal to the Tax Appeals Tribunal against a decision of the Commissioner under any of the Tax laws. The term “tax laws” has been defined under the same Section 2 of the Tax Appeals Tribunal Act to include the EACCMA.

81. Section 12 of the TAT Act provides as follows:-“A person who disputes the decision of the Commissioner on any matter arising under the provisions, subject to the provisions of the relevant tax law of any tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal”

82. The Appellant filed its appeal herein while the Commissioner was still seized of its application for review of its objection application, without waiting for the 30 days provide by law to lapse in which event, if the objection was allowed it would not be required to appeal to this Tribunal, if the objection was disallowed it would then chose to appeal, or if the period provided lapsed without a decision, the Commissioner would have been deemed to have allowed the objection. There is good reason for observing the statutory timelines.

83. The upshot of this is that the Appeal herein is premature as the Appellant had not exhausted the internal dispute resolution mechanism set out in Section 229 of EACCMA.

84. The doctrine of exhaustion requires that the Appellant ought to have exhausted the internal dispute resolution mechanisms before moving the Tribunal. In the case of Speaker of the National Assembly v Karume 1992 Eklr, it was stated that:-“where there is a clear procedure for redress of any particular grievance prescribed by the constitution or an Act of Parliament, that procedure should be strictly followed, Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures”

85. Further in Geoffrey Muthinja Kabiru & 2 others v Samuel Munga Henry & 1756 others, the court held as follows;“It is imperative that where a dispute resolution mechanism exists outside courts, the same be exhausted before jurisdiction of the courts is invoked, Courts ought to be a fora of last resort, and not the first port of call the moment a storm brews, The exhaustion doctrine is a sound one serves the purpose of ensuring that there a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection in the protection of his interest within the mechanisms in place for resolution outside courts…. This accords with article 159 of the Constitution which commands courts to encourage alternative means of dispute resolution,”

86. Though the Appellant has conceded tendering its Objection to the Respondent on 16th February 2022 and that to date the Respondent has never issued a review decision, it contended that the doctrine of exhaustion is not an absolute doctrine and has exceptions. It stated that the action complained of is marred with illegality and procedural irregularities and highlighted the issue as the Respondent administering non-existent tax laws. However, the Tribunal is of the view that the purported exception does not go to the root of the internal procedural mechanism established under the law, and therefore does not apply to the Appellant’s case.

87. The Appellant therefore ought to have waited for its objection application to be considered and a review decision thereon rendered by the Respondent before moving the Tribunal.

88. In light of the foregoing, the Tribunal finds that the Appeal is incompetent as it was filed without a review decision, despite the Appellant having lodged an objection application, and in the circumstances, there was not in existence an appealable decision upon which to ground the appeal. On the converse, the Objection Application for review was left hanging with the Commissioner without rendering the internal review mechanism incomplete, thus the Appellant breached the doctrine of exhaustion.

89. Consequently, in view of the foregoing this Tribunal has been stripped off jurisdiction to hear and determine this Appeal on its merits. To bring to the fore the importance of jurisdiction, the Tribunal cites that The Owners of Motor Vessel Lillian”S” v Caltex Oil Kenya Ltd [1989] KLR, where Nyarangi, JA, as he was then, stated as follow:-“That jurisdiction is everything, without it, a court has no power to make one more step, where a court has no jurisdiction there could be no basis for a continuation of proceedings pending other evidence. A court of law downs its tools in respect of the matter before it, the moment it holds the opinion that it is without jurisdiction.”

90. In light of the foregoing, the Tribunal finds the Appeal herein premature and therefore incompetent in law, as the Appellant filed the same without an appealable decision, and in breach of the doctrine of exhaustion, and therefore the Tribunal is not seized of the jurisdiction to entertain the said Appeal on its merits.

ii. Whether there was in existence any law fixing the duty rate for paper and paperboard products classified under tariff 4802:56:00 at 25% 91. The Tribunal having made the findings under issue (i) above, this issue (ii) is consequently rendered moot as the Tribunal lacks the requisite jurisdiction to hear and determine the merits of the Appeal.

Final Decision 92. The upshot of the foregoing is that the Appeal is incompetent and unsustainable in law and the Tribunal accordingly proceeds to make the following Orders ;i.The Appeal be and is hereby struck out.ii.Each party to bear its own costs,

93. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 19TH DAY OF MAY, 2023. ROBERT M. MUTUMA - CHAIRPERSONRODNEY O. OLUOCH - MEMBERELISHAH NJERU - MEMBERDELILAH K. NGALA - MEMBEREDWIN K.CHELUGET - MEMBER.